RAC Bidco Limited Investor Presentation FY19 Performance CEO: Dave - - PowerPoint PPT Presentation

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RAC Bidco Limited Investor Presentation FY19 Performance

Private and Confidential 11 March 2020 CEO: Dave Hobday & CFO: Jo Baker

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03 Overview and strategy 06 2019 Highlights 08 Capital expenditure 09 Financing structure 10 Financial ratios and covenants 11 Summary 12 Appendix 13 Disclaimer

Contents

3 Today, we are growing market share in our core

• categories. We are the UK’s 2nd largest roadside

assistance provider and the UK’s 3rd largest insurance broker In 2019, we delivered our 8th consecutive year of growth since separation from Aviva in 2011, testament to our truly differentiated “Complete Peace of Mind” proposition – Strong financial performance with like for like Group EBITDA growth of £19m (+9%) to £226m – 12.1 million customers, up 1.5 million in the year, as more members chose to join us and more chose to stay with us – Good operational performance, continuing to handle all demand patterns and volatility – Continued strong levels of end-to-end service and resulting benefits to customer retention; we delivered

• ur lowest ever “churn” in Consumer Breakdown

– Customer driven differentation through continued investment in our core membership and insurance businesses as the growth engines of the RAC – Investments in digital, data and expanded offerings bearing fruit The FY19 financial performance reflects the continued strong momentum across all of our divisions: – Consumer Breakdown: membership growth through retaining more customers, plus strong acquisition

• volumes. Supported by our strengthened and further

differentiated proposition. More sales of our highest ever cover levels giving drivers added service and reassurance – Business Breakdown: retained all existing corporate

• partners. Onboarded several new relationships,

including Groupe PSA, Saga and 1st Central. We are proud to confirm several new partnerships for 2020 including British Car Auctions and Monzo Bank – Insurance & Financial Services: grew our motor insurance customer base significantly. Our unique data assets, broking model and pricing capabilities deliver better value for customers Across the board, the business has real and sustainable momentum, with an ongoing series of initiatives and material new business wins The strong 2019 performance and “subscription model” are supporting a good start to 2020 3

Customer focused differentation continues to drive sustainable growth across the RAC in 2019 and beyond

Overview and strategy

Revenue £631m

+10% +6% +7%

2016 2017 2018 2019

EBITDA £226m

+3% +9% +9%

2016 2017 2018 2019

Operating Cash Flow £205m

+7% +4% +13%

2016 2017 2018 2019

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Overview and strategy

Our strategy remains consistent – it’s working and it’s driving momentum

Purpose For Complete Peace of Mind, you can trust the RAC for your driving needs RAC 2025

Sustainable business growth and returns – now and for the future

Summary

RAC is a consumer driving services subscription business, delivering long-term sustainable growth, underpinned by quality customer experience and enabled by our people, digital platforms and data

Enablers

Digital Platforms RAC and Third Party Data RAC Colleagues All seamlessly enabled by the My “one-stop-shop”

Brilliant Basics Supercharge the Core Expand our Market Leverage Future Mobility Trends

Continue what is working by making marginal gains at key points More near-term

• pportunities within our

core businesses Building future propositions to provide longer-term growth options Invest and innovate as evolving customer needs provide opportunities to accelerate growth

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Launch of virtual patrol and smartphone takeover Launch of new remote charger for electric vehicles Launch of garage network Launch of consumer loyalty rewards Introduction of revolutionary universal wheel to reduce tows and improve service Breakdown data used for insurance pricing Black box telematics insurance launched Launch of "all wheels up" trailers Pay As You Drive insurance pilot Launch of HD 4x4 van Launch

• f “MyRAC”

2016 2014 2018 2015 2017 2019 2013

Overview and strategy

Our growth is underpinned by significant investment in customer innovation, continuing to support the delivery of profitable and sustainable growth

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KPIs

Strong financial performance – Revenue of £631m, +£39m (+7%) vs 2018 – EBITDA of £226m, +£19m (+9%) vs 2018 – Operating Cash flow of £205m, +£24m (+13%) vs 2018 – Continued strong cash conversion of 91% (2018: 87%) Robust operational KPIs supporting our focus on the core

• f our business

– Roadside Repair rate of 81% (2018: 80%) – Roadside Membership churn rate of 16% (2018: 18%) – Highest ever Insurance & Financial Services members with c.700k policies in force (2018: c.600k)

2019 Highlights

Revenue (£m) EBITDA (£m) Operating Cash Flow (£m)

558 592 631 2016 2017 2018 2019 506 190 207 226 205 181 174 162 2016 2017 2018 2019 184 2016 2017 2018 2019 +10% +3% +7% +6% +9% +4% +7% +9% +13%

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Segmental trading performance

+9% year on year EBITDA growth to £226m delivered through balanced trading performance across Membership Services and Insurance & Financial Services Membership Services grew EBITDA by £15m (+7%) to £222m. Revenue grew by +4%, supported by growth in members in both Consumer and Business Breakdown Insurance and Financial Services grew EBITDA by £5m (+13%) to £44m. Revenue grew by 23% and was partly offset by higher negative commissions on new policies. Income per policy, net of negative commissions, was stable year on year Head office costs broadly flat at £40m (2018: £39m)

78 39* 96 44* 514 207* 535 222*

Membership Services Insurance & Financial Services Membership Services Insurance & Financial Services

Revenue (£m) EBITDA (£m)

2019 Highlights

592

2018

631

2019

207

2018

226

2019

*pre head office costs

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RAC remains well invested

The business is well invested and we continue to target expenditure aligned to our strategy covering both current priorities and selected opportunities to support future growth Capital Investment on target with £47 million invested in 2019 across tangible and intangible assets (2018: £53 million). This excludes a further £2.5 million of capital investment committed as at year end Capex investment across a number of areas, including: – Additional functionality on the “MyRAC” digital platform and full re-platforming – Conversion improvements on the consumer web journey and save tools for Contact Centre – More4More enhanced customer loyalty offerings – “Track My Rescue” breakdown support – Expanded “Remote Fix” smartphone capability – Roll out of unique patrol Electric Vehicle charging capabilities – Roll out of our award-winning “Heavy Duty 4x4” patrol vehicles – Deployment of our rapidly deployable “all wheels up” trailers – Development of unique insurance data assets to enhance risk-based pricing capability – Deployment of Insurer Hosted Pricing capabilities

Capital Investment (£m)

Customer Acquisition & Insurance Broking Commissions Investment and Maintenance Capex

Capital expenditure

27 20

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No changes to financing structure in 2019*

Class A1 Notes, Class A2 Notes and Senior Term Facility put in place under the Whole Business Securitisation (“WBS”) completed in May 2016 Class B1 Notes issued in July 2017 of £275m No change to S&P rating assigned to Class A1 and A2 Notes of BBB (sf) or Class B1 Notes of B (sf) *In January, we successfully refinanced our Senior Term Facility (“STF”) and Working Capital Facility (“WCF”) ahead of maturity. £300 million STF and £50 million WCF at a floating rate of LIBOR plus 2.5%. STF remains 100% hedged through an interest rate swap agreement

Facility £m Due Coupon Class A1 Notes 300 May 2023/46 4.565% Class A2 Notes 600 May 2026/46 4.870% Class B1 Notes 275 November 2022/46 5.000% Senior Term Facility* 280 May 2021 LIBOR + 2.75% Drawn Debt 1,455 Working Capital Facility 49 May 2021 LIBOR + 2.75% Liquidity Facility 90 Renewed annually LIBOR + 2.25% Undrawn Debt 139

Financing structure

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Significant covenant headroom, with all ratios improving year on year

Class A and Class B FCF DSCR covenants met with significant headroom Net leverage of 6.3x (2018: 7.0x) No pension funding deficit and no off balance sheet liabilities

Class A FCF DSCR 2019 2018 Actual 3.25 3.02 Trigger 1.35 1.35 Default 1.10 1.10 Class B FCF DSCR 2019 2018 Actual 2.62 2.44 Default 1.00 1.00 Leverage 2019 2018 EBITDA (£m) 226 207 Gross debt (£m) 1,437 1,455 Unrestricted cash (£m) (90) (84) IFRS 16 Lease Liability 71 75 Net debt (£m) 1,418 1,446 Leverage 6.3x 7.0x

Financial ratios and covenants

Summary

Strong financial and customer performance in 2019 with near double digit EBITDA growth, 12.1 million members and 91% EBITDA cash conversion Sustainable capital structure, with significant covenant headroom and successful bank refinancing in January 2020 Our strategy is delivering sustainable growth and Complete Peace of Mind for our members: – “Brilliant Basics” continues to provide long-term strong momentum – Rolling series of unique and differentiated initiatives is “Super-Charging” our performance – Adjacent opportunities allow us to “Expand our Market” – Our digital platforms and data capabilities position us to “Leverage Future Mobility Trends” Strong start to 2020 continuing the momentum from 2019 Positively positioned, clearly differentiated, and well invested to maintain our trajectory 1 1

Outlook

The RAC remains an iconic and resilient consumer brand, and the need for our increasingly broad range of products and services continues to grow Fuelled by our 2019 momentum, new customer wins and underpinned by our Complete Peace of Mind strategy, we are pleased that 2020 has got off to a very positive start, trading well ahead of prior year We expect to continue to deliver sustainable growth in members, exceptional customer service, and strong financial performance We are well invested and well placed for further growth as we execute on our strategy for “RAC 2025”

1 2 RAC

Jo Baker

Chief Financial Officer Email: Investor.Relations@rac.co.uk RAC

Bruce Claassen

Group Finance Director Email: Investor.Relations@rac.co.uk

Financial calendar

August 2020

Half year results to 30 June 2020

February 2021

Annual Report & Financial Statements for year ending 31 December 2020

Key company contacts

Appendix

1 3 This document contains statements that are, or may be deemed to be, ‘forward-looking statements’ with respect to the RAC Bidco Limited Group’s (“RAC”) financial condition, results of operations and business and certain of RAC’s plans and objectives with respect to these items. Forward-looking statements are sometimes, but not always, identified by their use of a date in the future or such words as ‘anticipates’, ‘aims’, ‘due’, ‘could’, ‘may’, ‘will’, ‘would’, ‘should’, ‘expects’, ‘believes’, ‘intends’, ‘plans’, ‘projects’, ‘potential’, ‘reasonably possible’, ‘targets’, ‘goal’ or ‘estimates’ and, in each case, their negative or other variations or comparable terminology. Any forward-looking statements in this document are based on RAC’s current expectations and, by their very nature, forward- looking statements are inherently unpredictable, speculative and involve risk and uncertainty because they relate to events and depend on circumstances that may or may not occur in the

• future. Forward-looking statements are not guarantees of future

performance and no assurances can be given that the forward- looking statements in this document will be realised. There are a number of factors, many of which are beyond RAC’s control, that could cause actual results, performance and developments to differ materially from those expressed or implied by these forward-looking statements. These factors include, but are not limited to, changes in the economies and markets in which the Group operates; changes in the regulatory and competition frameworks in which the Group operates; the impact of legal or

• ther proceedings against or which affect the Group; and changes

in interest and exchange rates. All written or verbal forward-looking statements, made in this document or made subsequently, which are attributable to RAC or any other member of RAC or persons acting on their behalf are expressly qualified in their entirety by the factors referred to above. Subject to compliance with applicable laws and regulations, RAC does not intend to update these forward-looking statements and does not undertake any obligation to do so. Nothing in this document should be regarded as a profits forecast.

Registered Offices: RAC House, Brockhurst Crescent, Walsall WS5 4AW. RAC Motoring Services and RAC Financial Services Ltd are authorised and regulated by the Financial Conduct Authority in respect of insurance mediation activities. RAC Insurance Ltd is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.

Disclaimer